Chancellor Rishi Sunak has dropped controversial plans to force workers to pay for coronavirus tests organised by their employers through their tax returns, on the eve of his coronavirus “mini-Budget”.

HMRC guidance published this week had made clear that employees will face a taxable benefit in kind for private tests carried out in the workplace.

The decision would have meant that an employee could see their take-home pay cut by more than £3,000 per year if they have to be regularly tested, according to calculations seen by The Telegraph.

The decision immediately raised fears that people will be put off from testing to avoid being left out of pocket. MPs said treating a coronavirus test as a workplace “benefit” was “a joke”.

However, on Tuesday, within hours of Tory Treasury select committee chairman Mel Stride writing to Mr Sunak to complain about the plans, the Treasury dropped them late on Tuesday night, on the eve of Mr Sunak’s statement to MPs about his plans to support the economy through the coronavirus crisis.

The guidance had said: “Coronavirus (Covid-19) testing kits or tests carried out by a third party which have been purchased by you to provide to your employees, are treated as a taxable benefit in kind on the employee.”

This had meant that a cash value will be assigned to the coronavirus test by the employer, and the employee will pay Income Tax on this amount through Pay As You Earn (PAYE).

Mr Strid said: “Many of our key workers could be faced with the perverse incentive of avoiding employer-sponsored tests in order to reduce their tax bill.

“This can’t be right. I’ve asked the Chancellor to look into this as soon as possible.”

Layla Moran, the Liberal Democrat leadership contender, added: “We cannot have a system where you pay tax as you test.

“The government cannot class a vital health test as a ‘benefit’, and the idea that this is a perk for an employer or employee is a joke.”

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